SBJ continues to cover the fallout of Nixa-based Guaranty Title Co.'s abrupt June 19, 2007, closure that has left its underwriter, the state and others in the industry with unanswered questions. Click here for past coverage.
The financial underwriter for a Nixa-based title insurance company that abruptly closed in June 2007 due to alleged fraud is again being blamed for the actions of its former agent.
Arkansas-based Arvest Bank has filed suit against LandAmerica Financial Group Inc. (NYSE: LFG), a Virginia-based network of companies that provides a range of real estate transaction services. Through subsidiaries Commonwealth Land Title Insurance and Transnation Title Insurance Cos., LandAmerica underwrote policies issued by Guaranty Title Co., which had nine offices in southwest Missouri prior to its collapse.
Arvest has alleged in the suit - originally filed in Jasper County Circuit Court in late August - that Commonwealth failed to comply with the terms of an insured closing letter issued by a closing agent in Guaranty Title's Joplin office in March 2007.
According to court documents, Arvest forwarded $805,000 to Guaranty Title with instructions to disburse the loan proceeds to Rogersville-based development company American Equities LLC and to ensure that the bank's deed of trust was in a "first lien position."
The registered agents for American Equities had planned to use the loan to develop Hidden Valley Estates subdivision in Stone County, records show.
Guaranty Title disbursed the proceeds but failed to assure Arvest's lien position or record the bank's deed of trust in a timely fashion, according to the suit. The deed was actually filed July 24, 2007, more than a month after Guaranty Title shut down without warning and laid off about 45 employees.
Also in late July 2007, LandAmerica filed suit against Guaranty Title after its auditors discovered $5.1 million missing from escrow accounts at area banks - likely the result of an alleged check-kiting scheme. That suit is pending in Christian County Circuit Court.
Arvest has claimed that LandAmerica is liable for the actions of its former agent, which failed to clear numerous liens against the real estate and ensure the bank's first lien position.
Arvest's secured interest was preceded by at least nine other liens securing bank notes totaling more than $502,000, court records show.
Consequently, American Equities was unable to sell subdivided lots in Hidden Valley Estates, according to the suit. The development company later defaulted on the loan, and Arvest foreclosed on the property.
Stephen Cope and Preston Peterson, both of Rogersville, are the managing members of American Equities, according to documents on file at the Secretary of State's office. Cope did not return a phone call from Springfield Business Journal.
According to the suit, LandAmerica has denied Arvest's request for reimbursement. LandAmerica's St. Louis attorney, Jack Hilton, said he was not prepared to address the merits of the case. Hilton did, however, say that the suit was recently moved to U.S. District Court at his client's request. Federal Judge James England has assigned the case to an outside mediator.
John Dolence, the Joplin attorney representing Arvest, said in an e-mail that his client does not publicly discuss pending litigation as a matter of policy.
